Second Quarter
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997 Commission file number 1-164
------------- -----
ASARCO Incorporated
(Exact name of registrant as specified in its charter)
New Jersey 13-4924440
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
180 Maiden Lane, New York, N.Y. 10038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-510-2000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
As of July 31, 1997 there were outstanding 42,115,948 shares of Asarco Common
Stock, without par value.
<PAGE>
ASARCO Incorporated
and Subsidiaries
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statement of Earnings
Three Months and Six Months Ended
June 30, 1997 and 1996 2
Condensed Consolidated Balance Sheet
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statement of Cash Flows
Three Months and Six Months Ended
June 30, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-18
Report of Independent Accountants 19
Part II. Other Information:
Item 1. Legal Proceedings 20
Item 6(a) Exhibits on Form 10Q 21
Exhibit 11 - Statement re Computation of Earnings per Share
Exhibit 12 - Statement re Computation of Consolidated Ratio of Earnings to Fixed
Charges and Combined Fixed Charges and Preferred Share Dividend
Requirements
Signatures 22
Exhibit I - Independent Accountants' Awareness Letter
</TABLE>
- 1 -
<PAGE>
ASARCO Incorporated
and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Sales of products and services $740,968 $682,471 $1,456,567 $1,416,689
Operating costs and expenses:
Cost of products and services 558,116 521,959 1,089,964 1,087,653
Selling, administrative and other 36,327 32,266 69,696 65,382
Depreciation and depletion 31,927 28,223 62,158 58,926
Research and exploration 10,016 7,093 19,820 13,996
Environmental and other closed plant
charges, net of recoveries 8,038 4,569 12,402 9,726
-------- -------- --------- ---------
Total operating costs and expenses 644,424 594,110 1,254,040 1,235,683
-------- -------- --------- ---------
Operating income 96,544 88,361 202,527 181,006
Interest expense (19,387) (20,414) (35,932) (42,514)
Other income 12,925 6,665 17,891 18,269
Gain on sale of investments and other
interests 20,665 60,075 20,665 71,158
-------- -------- --------- --------
Earnings before taxes on income and minority
interests 110,747 134,687 205,151 227,919
Taxes on income 29,602 40,058 56,224 72,987
-------- -------- -------- ---------
Earnings before minority interests 81,145 94,629 148,927 154,932
Minority interests in net earnings of
consolidated subsidiaries (29,271) (22,226) (56,473) (46,844)
-------- -------- --------- ---------
Net earnings $ 51,874 $ 72,403 $ 92,454 $ 108,088
======== ======== ========= =========
Per share amounts:
Net earnings (a) $ 1.21 $ 1.70 $ 2.15 $ 2.53
======== ======== ========= =========
Cash dividends $ 0.20 $ 0.20 $ 0.40 $ 0.40
Weighted average number of shares outstanding 42,931 42,693 42,903 42,655
</TABLE>
(a) The effect on the calculation of net earnings per common share of the
Company's Common Stock equivalents (shares under option) was
insignificant.
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE>
ASARCO Incorporated
and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(unaudited)
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 272,116 $ 192,408
Marketable securities 208,848 1,039
Accounts and notes receivable, net 570,712 540,560
Inventories 358,008 383,281
Prepaid expenses 104,029 43,478
Other assets 18,972 24,378
--------- ----------
Total current assets 1,532,685 1,185,144
Investments:
Available-for-sale and other cost 315,995 442,707
Equity 63,504 59,787
Net property 2,290,766 2,274,088
Other assets including intangibles, net 165,495 158,623
---------- ----------
Total Assets $4,368,445 $4,120,349
========== ==========
LIABILITIES
Current liabilities:
Bank loans $ 225 $ 15,913
Current portion of long-term debt 40,485 39,815
Accounts payable 355,942 436,604
Salaries and wages 37,304 32,427
Taxes on income 75,404 57,695
Reserve for closed plant and environmental matters 42,283 38,128
Other current liabilities 51,544 51,975
---------- ----------
Total current liabilities 603,187 672,557
---------- ----------
Long-term debt 955,377 758,583
Deferred income taxes 162,661 173,245
Reserve for closed plant and environmental matters 71,456 90,205
Postretirement benefit obligations 102,053 99,945
Other liabilities and reserves 155,503 93,163
---------- ----------
Total non-current liabilities 1,447,050 1,215,141
---------- ----------
MINORITY INTERESTS 525,959 495,706
--------- ----------
COMMON STOCKHOLDERS' EQUITY
Common stock (a) 619,877 614,443
Unrealized gain on securities reported at fair value 40,034 56,311
Retained earnings 1,132,338 1,066,191
---------- ----------
Total Common Stockholders' Equity 1,792,249 1,736,945
---------- ----------
Total Liabilities, Minority Interests and Common
Stockholders' Equity $4,368,445 $4,120,349
========== ==========
(a) Common shares: authorized 80,000; outstanding: 42,898 42,824
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE>
ASARCO Incorporated
and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
June 30, June 30
1997 1996 1997 1996
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings 51,874 $72,403 92,454 $108,088
Adjustments to reconcile net earnings
to net cash provided from (used for)
operating activities:
Depreciation and depletion 31,927 28,223 62,158 58,926
Provision for deferred income taxes 263 13,777 4,358 19,656
Treasury stock used for employee benefits 828 1,388 2,967 3,441
Undistributed equity (earnings) losses (1,212) (308) (3,048) 586
Net gain on sale of investments and property (20,485) (60,087) (20,719) (71,248)
Decrease in reserves for closed plant
and environmental matters (10,792) (9,608) (14,594) (20,522)
Minority interests 29,271 22,227 56,473 46,844
Cash provided from (used for) operating assets and liabilities:
Accounts receivable (13,841) 2,065 (32,927) 42,858
Inventories 17,904 (13,200) 24,314 (18,632)
Accounts payable and accrued liabilities 21,395 25,419 (57,450) (35,103)
Other operating assets and liabilities (6,601) (10,536) 579 (45,486)
Foreign currency transaction losses (985) (1,158) (1,075) (2,459)
-------- -------- -------- --------
Net cash provided from operating activities 99,546 70,605 113,490 86,949
------- -------- -------- --------
INVESTING ACTIVITIES
Capital expenditures (60,969) (70,449) (123,749) (122,159)
Sale of securities, investments and property 40,662 327,339 40,716 385,486
Purchase of investments (593) (3,294) (2,108) (2,459)
Sale of available-for-sale securities 141,241 4,478 172,760 15,920
Purchase of available-for-sale securities (19,285) (4,776) (50,118) (15,978)
Purchase of held-to-maturity investments (208,827) - (208,827) (2)
Proceeds from held-to-maturity investments 14 2 1,018 -
-------- ------- --------- --------
Net cash (used for) provided from investing
activities (107,757) 253,300 (170,308) 260,808
-------- ------- -------- --------
FINANCING ACTIVITIES
Debt incurred 200,034 33 282,804 47,352
Debt repaid (86,257) (313,988) (100,880) (323,611)
Treasury stock used for corporate purposes 263 483 1,287 1,196
Treasury stock purchased (1,983) (32) (3,210) (545)
Purchase of minority interests (928) - (2,681) (2,509)
Distributions to minority interests (13,922) (11,882) (25,715) (37,734)
Contributions from minority interests 801 750 1,551 1,000
Dividends paid to common stockholders (8,591) (8,540) (17,170) (17,065)
--------- ------- -------- --------
Net cash provided from (used for) financing
activities 89,417 (333,176) 135,986 (331,916)
-------- -------- -------- --------
Effect of exchange rate changes on cash 657 1,483 540 3,380
-------- -------- -------- --------
Increase (decrease) in cash and cash equivalents 81,863 (7,788) 79,708 19,221
Cash and cash equivalents at beginning of period 190,253 265,409 192,408 238,400
-------- -------- -------- --------
Cash and cash equivalents at end of period $272,116 $257,621 $272,116 $257,621
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE>
ASARCO Incorporated
and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly the Company's
financial position as of June 30, 1997 and the results of operations and
cash flows for the three month and six month periods ended June 30, 1997
and 1996. Certain reclassifications have been made in the financial
statements from amounts previously reported. This financial data has been
subjected to a limited review by Coopers & Lybrand L.L.P., the Company's
independent accountants. The results of operations for the three month and
six month periods are not necessarily indicative of the results to be
expected for the full year. The year end condensed consolidated balance
sheet data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting
principles. The accompanying condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's 1996 annual report on Form
10-K.
B. During the second quarter of 1997, the Company sold 43.4 million shares of
Grupo Mexico, S.A. de C.V. (Grupo Mexico) for gross proceeds of $126.2
million, resulting in a pre-tax gain of $20.7 million ($13.4 million
after-tax). At current market prices, the value of the Company's remaining
interest in Grupo Mexico is approximately $290 million including
approximately $80 million representing the exercise price of shares under
option. In the second quarter of 1996, the Company sold its 15.0% interest
in M.I.M. Holdings Limited (MIM) for $326.2 million, resulting in a pre-tax
gain of $60.1 million and an after-tax gain of $39.0 million. The Company's
results for the six months ended June 30, 1996 include an $11.1 million
pre-tax gain ($7.2 million after-tax) on the sale of a 25% interest in its
Silver Bell project to Mitsui & Co., Ltd.
C. In the first quarter of 1997, the Government of Peru approved a
reinvestment allowance for a program of Southern Peru Copper Corporation
(SPCC), a 54.1% owned subsidiary of the Company, to expand the Cuajone
mine. The reinvestment allowance provides SPCC with tax incentives in Peru
and, as a result, certain U.S. tax credit carryforwards, for which no
benefit has previously been recorded, are expected to be realized. The
Company's beneficial interest in the estimated net earnings impact of the
reduction in the effective tax rate as a result of the reinvestment
allowance, for the second quarter of 1997 is approximately $2.3 million and
for the six months ended June 30, 1997, approximately $3.9 million.
Pursuant to the reinvestment allowance SPCC will receive tax deductions in
Peru in amounts equal to the cost of the qualifying property (approximately
$245 million). As qualifying property is acquired, the financial statement
carrying value of the qualifying property will be reduced to reflect the
tax benefit associated with the reinvestment allowance (approximately $73
million). As a result, financial statement depreciation expense related to
the qualifying property will be reduced over its useful life (approximately
15 years).
- 5 -
<PAGE>
D. Inventories were as follows:
(in millions)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1997 1996
<S> <C> <C>
Inventories of smelters and refineries at lower of
LIFO cost or market $ 9.0 $ 10.3
Provisional cost of metals received from suppliers
for which prices have not yet been fixed 24.9 44.5
Mine inventories at lower of FIFO cost or market 98.9 105.8
Metal inventory at lower of average cost or market 50.2 49.5
Materials and supplies at lower of average cost or
market 145.3 141.0
Other 29.7 32.2
------ ------
Total $358.0 $383.3
====== ======
</TABLE>
At June 30, 1997, replacement cost exceeded inventories carried at LIFO
cost by approximately $101.3 million (December 31, 1996 - $115.2 million).
Liquidation of LIFO inventories resulted in pre-tax earnings of $15.9
million in the second quarter of 1997.
E. Metal Hedging and Trading Activities:
Hedging: Depending on the market fundamentals of a metal and other
conditions, the Company may purchase put options or establish synthetic put
options to reduce or eliminate the risk of metal price declines on a
portion of its anticipated future production. Put options purchased by the
Company establish a minimum sales price for the production covered by such
put options and permit the Company to participate in price increases above
the option price. Synthetic put options are established by purchasing a
call option and entering into a forward sale for the same quantity of metal
at approximately the same price and for the same time period as the call
option. The cost of options is amortized on a straight-line basis during
the period in which the options are exercisable. Depending upon market
conditions the Company may sell options it holds or exercise the options at
maturity. Gains or losses, net of unamortized acquisition costs are
recorded as current liabilities or current assets and are subsequently
recognized in the period in which the underlying production is sold. The
Company also uses futures contracts to hedge the effect of price changes on
a portion of the metals it sells. Gains and losses on hedge contracts are
reported as a component of the underlying transaction.
Second quarter 1997 earnings include pre-tax gains of $2.2 million ($1.4
million after-tax) and $13.4 million ($8.7 million after-tax) for the six
month period ended June 30, 1997, from the sale or exercise of put options
covering primarily copper sold in the first half of 1997. First quarter
1997 earnings include the Company's proportionate interest in pre-tax gains
of SPCC. There were no pre-tax gains or losses from SPCC price protection
in the second quarter of 1997. A pre-tax gain of $2.9 million ($1.8 million
after-tax) from the sale of put options in 1996 remains to be recognized in
1997 when the underlying production is sold.
- 6 -
<PAGE>
As of June 30, 1997, the Company held synthetic puts covering 72.4 million
pounds of copper at an average strike price of $1.04 per pound and 14.6
million pounds of zinc at an average strike price of $0.52 covering a
portion of production to be sold in the second half of 1997.
Trading: As part of its price protection program, the Company may establish
synthetic put options. Each component of a synthetic put option may be
purchased or sold at different times. In those cases where the forward sale
component has not been entered into or has been offset, call options are
accounted for as trading activities and the carrying values of such call
options are recorded as investments and are marked to market and any
related adjustments are recorded in earnings. Second quarter 1997 earnings
include pre-tax gains of $0.1 million ($0.1 million after-tax) from the
sale or exercise of call options in the second quarter of 1997 and $1.1
million ($0.7 million after-tax) of unrealized mark to market gains.
Earnings for the six month period ended June 30, 1997 include pre-tax gains
of $0.5 million ($0.4 million after-tax) from the sale or exercise of call
options in 1997 and $5.5 million ($3.6 million after-tax) of unrealized
mark to market gains.
Copper Price Protection held at June 30, 1997
(in millions, except per lb. amounts)
<TABLE>
<CAPTION>
Percent of
Strike Price Unamortized Estimated
Pounds Period Per Pound Cost Production
------ ------ --------- ---- ----------
<S> <C> <C> <C> <C> <C>
ASARCO 36.2 7/97 - 9/97 $1.04 $1.1 21%
91.1 10/97 - 12/97 $0.99 $2.2 55%
44.0 1/98 - 3/98 $0.95 0.7 26%
-----
$4.0
SPCC 94.1 10/97 - 12/97 $0.95 $1.4 54%
44.0 1/98 - 3/98 $0.95 0.6 28%
-----
$2.0
</TABLE>
Gains and (Losses): The recognized pre-tax gains (losses) of the Company's metal
hedging and trading activities, were as follows:
<TABLE>
<CAPTION>
(in millions) Three Months Ended Six Months Ended
June 30, June 30,
Metal 1997 1996 1997 1996
----- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Copper $3.6 $(0.4) $18.7 $(1.8)
Zinc (0.2) - 0.7 -
Lead - 0.2 - 0.2
---- ----- ----- -----
Total Gain (Loss) $3.4 $(0.2) $19.4 $(1.6)
==== ===== ===== =====
</TABLE>
- 7 -
<PAGE>
F. Contingencies and Litigation:
The Company is a defendant in lawsuits in Arizona involving the United
States, Native Americans and other Arizona water users contesting the right
of the Company and numerous other individuals and entities to use water
and, in some cases, seeking damages for water usage and contamination of
ground water. The lawsuits could potentially affect the Company's use of
water at its Ray Complex, Mission Complex and other Arizona operations.
The Company and certain subsidiaries are defendants in four class action
and fifteen other lawsuits in Texas seeking substantial compensatory and
punitive damages for personal injury and contamination of property
allegedly caused by present and former operations, primarily in Texas, and
product sales of the Company and its subsidiaries. Most of the cases name
additional corporations as defendants.
The Company and two subsidiaries, at June 30, 1997, are defendants in 569
lawsuits brought by 5,537 primary and 2,183 secondary plaintiffs seeking
substantial actual and punitive damages for personal injury or death
allegedly caused by exposure to asbestos. Three of these lawsuits are
purported statewide class actions brought on behalf of classes of persons
who are not yet known to have asbestos related injury, one of which has
been dismissed subject to appeal. One subsidiary was dismissed from one
lawsuit seeking damages for removal or containment of asbestos-containing
products in structures. Plaintiffs have appealed. In addition, the Company
and certain subsidiaries are defendants in product liability lawsuits
involving various other products, including metals.
In March 1996, the United States government filed an action in United
States District Court in Boise, Idaho, against the Company and three other
mining companies under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA" or "Superfund") and the
federal Clean Water Act for alleged natural resource damages to the Coeur
d'Alene River Basin in Idaho. The government contends that the defendants
are liable for damages to natural resources in a 1,500 square mile area
caused by mining and related activities that they and others undertook over
approximately the period between the mid-1800s and the mid-1960s. The
action also seeks a declaration that defendants are liable for restoration
of the area. The Company believes, and has been advised by outside legal
counsel, that it has strong legal defenses to the lawsuit. In June 1997
several companies, including certain subsidiaries of the Company, were
notified by the United States government that they might be added to the
lawsuit.
The Company and certain of its subsidiaries have received notices from the
United States Environmental Protection Agency ("EPA") and the United States
Forest Service that they and in most cases numerous other parties are
potentially responsible to remediate alleged hazardous substance releases
at certain sites under CERCLA. In addition, the Company and certain of its
subsidiaries are defendants in lawsuits brought under CERCLA or state laws
which seek substantial damages and remediation. Remedial action is being
undertaken by the Company at some of the sites.
- 8 -
<PAGE>
In connection with the sites referred to above, as well as at other closed
plants and sites where the Company is working with the EPA and state
agencies to resolve environmental issues, the Company accrues for these
losses when such losses are probable and reasonably estimable. Such
accruals are adjusted as new information develops or circumstances change
and are not discounted to their present value. Recoveries of environmental
remediation costs from other parties are recorded as assets when the
recovery is deemed probable.
Reserves for closed plants and environmental matters totaled $113.7 million
at June 30, 1997. The Company anticipates that expenditures relating to
these reserves will be made over the next several years. Net cash
expenditures charged to these reserves for the three months ended June 30,
1997 and 1996 were $18.7 million and $10.7 million, respectively and for
the six months ended June 30, 1997 and 1996 were $27.0 million and $23.9
million, respectively. Net cash expenditures charged to reserves were $54.1
million in 1996 and $95.8 million in 1995. The Company incurred expenses of
$15.0 million ($72.0 million in charges offset by $57.0 million in
insurance and other recoveries) in 1996 for environmental and closed plant
liabilities, including $10.0 million for the effect of the application of
the American Institute of Certified Public Accountants: Statement of
Position 96-1 "Environmental Remediation Liabilities." Environmental and
other closed plant expenses in 1995 and 1994 were $76.3 million and $65.6
million, respectively.
Future environmental related expenditures cannot be reliably determined in
many circumstances due to the early stages of investigation, the
uncertainties relating to specific remediation methods and costs, the
possible participation of other potentially responsible parties and
changing environmental laws and interpretations. Similarly, due to the
uncertainty of the outcome of court proceedings, future expenditures
related to litigation cannot be reliably determined. It is the opinion of
management that the outcome of the legal proceedings and environmental
contingencies mentioned, and other miscellaneous litigation and proceedings
now pending, will not materially adversely affect the financial position of
Asarco and its consolidated subsidiaries. However, it is possible that
litigation and environmental contingencies could have a material effect on
quarterly or annual operating results, when they are resolved in future
periods. This opinion is based on considerations including experience
related to previous court judgments and settlements and remediation costs
and terms. The financial viability of other potentially responsible parties
has been considered when relevant and no credit has been assumed for any
potential insurance recovery when it is not deemed probable.
- 9 -
<PAGE>
G. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (the
"Statement"). The Statement specifies the computation, presentation and
disclosure requirements for earnings per share ("EPS"). It will require the
Company to present both basic and diluted EPS amounts from income for
continuing operations and net income on the face of the income statement.
The Company does not expect the impact of this statement to have a material
effect on its calculation of EPS. The statement will be effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" and
Statement of Financial Accounting Standards No. 131 "Disclosures About
Segments Of An Enterprise And Related Information." The Company is
currently assessing the impact of these statements, both of which are
effective for fiscal years beginning after December 15, 1997.
- 10 -
<PAGE>
Part I Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company reported net earnings of $51.9 million, or $1.21 per share, for the
second quarter ended June 30, 1997, compared with net earnings of $72.4 million,
or $1.70 per share, for the second quarter of 1996. Results for the second
quarter of 1997 include an after-tax gain of $13.4 million, or $0.31 per share,
from the sale of a portion of the Company's interest in Grupo Mexico, S.A. de
C.V. (Grupo Mexico), Mexico's largest mining company. Results for the three
month period ended June 30, 1996 include an after-tax gain of $39.0 million, or
$0.92 per share, from the sale of the Company's remaining interest in M.I.M.
Holdings Limited (MIM), an Australian based mining company.
Exclusive of gains from the sale of investments, the Company's net earnings
increased by $5.1 million in the second quarter of 1997 compared with 1996. The
increase resulted from higher sales volumes at the Company's North American
copper operations, gains from the Company's price protection program and a lower
Peruvian tax rate. Earnings from the Company's Peruvian copper operations had
been negatively affected in the second quarter of 1996 by $4.1 million of
adjustments to provisionally priced sales as a result of the sharp decline in
copper prices in June of 1996. Second quarter 1997 earnings also reflected
improved results from the Company's specialty chemicals and aggregates
businesses, increased losses at its lead operations, and the receipt of a
dividend from Grupo Mexico.
For the six month period ended June 30, 1997, the Company reported net income of
$92.5 million, or $2.15 per share, compared with net earnings of $108.1 million,
or $2.53 per share, for the comparable 1996 period. Results for the six month
period ended June 30, 1997, included pre-tax gains of $19.4 million from the
Company's price protection program. Results for the six month period ended June
30, 1996 include an after-tax gain of $7.2 million, or $.17 per share, on the
sale of a 25% interest in the Company's Silver Bell project.
During June 1997 the Company sold 43.4 million shares of Grupo Mexico for gross
proceeds of $126.2 million, resulting in a pre-tax gain of $20.6 million ($13.4
million after-tax). Following the sales, the Company held a 17.3% interest in
Grupo Mexico including 56.3 million shares, equivalent to an 8.2% interest,
which are subject to a fixed price purchase option. At current market prices,
the value of the Company's remaining interest in Grupo Mexico is approximately
$290 million including approximately $80 million representing the exercise price
of the shares under option.
In late June, the Company announced that it would use $100 million of the
proceeds from the sale of Grupo Mexico shares to repurchase its own shares.
Through the six month period ended June 30, 1997 the Company had repurchased
63,000 shares at a cost of $1.9 million.
- 11 -
<PAGE>
The Company's beneficial interest in mined copper production in the second
quarter of 1997 was 229.6 million pounds, an 11% decrease from the same period
in 1996. For the first six months of 1997, the Company's beneficial mined copper
production was 463.1 million pounds compared with 509.2 million pounds in the
first six months of 1996. The principal reasons for the decrease in the
Company's mined copper production in the second quarter and first six months of
1997 were lower ore grades at its North American copper operations and the
partial curtailment of the Hayden concentrator at the Company's Ray mine in
Arizona. The Hayden concentrator resumed full operations in May 1997.
The Company's specialty chemicals and aggregates businesses both recorded
earnings improvements in the three month and six month periods ended June 30,
1997. Operating income from the Company's specialty chemicals business increased
by 25.8% in the second quarter of 1997 over the comparable 1996 period, to $7.8
million, as a result of strong sales growth particularly in North America.
Increases in sales and margins led to a 40.5% increase in operating income at
the Company's aggregates business in the second quarter of 1997 compared with
the same period in 1996.
As of June 30, 1997, the Company's lead refinery in Omaha, Nebraska ceased
operations. Actual lead refining operations at Omaha ended in June 1996 and
during the past year most of the remaining material at the plant was processed
or sold. As a result of the closure of Omaha, the portion of the Company's last
in-first out (LIFO) metal inventory attributable to Omaha, which for financial
purposes was carried at low historical values, was permanently liquidated
resulting in a pre-tax gain of $15.9 million. Also during the second quarter of
1997, the Company recognized costs in its custom lead business, which included
the Omaha refinery, for metals which will not be recovered. The net effect of
these events on second quarter results was not material.
Sales: Sales in the second quarter of 1997 were $741.0 million, compared with
$682.5 million in the second quarter of 1996, primarily a result of a higher
volume of copper sales. Sales for the six month period ended June 30, 1997, were
$1,456.6 million compared to $1,416.7 million for the comparable 1996 period.
Adjustments for provisionally priced sales of copper, principally related to
SPCC, reduced sales in the second quarter of 1996 by $13.8 million and $27.4
million for the six month period ended June 30, 1996. Adjustments for
provisionally priced copper sales were insignificant in the second quarter of
1997 and increased sales by $11.6 million in the first quarter of 1997. Sales of
refined copper purchased by the Company were lower by $5.4 million and $21.9
million in the second quarter and six month periods ended June 30, 1997,
respectively, compared to the same periods in 1996.
- 12 -
<PAGE>
Metal sales volumes and prices for the quarter were as follows:
Metal Sales Volume:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Copper (000s pounds)
Asarco ............................................................................... 271,400 251,200 549,200 535,200
SPCC ................................................................................. 184,000 161,800 356,000 330,800
------- ------- ------- -------
Consolidated ......................................................................... 455,400 413,000 905,200 866,000
Asarco Beneficial Interest (2) ....................................................... 368,400 335,800 736,800 708,200
Lead (000s pounds)
Asarco ............................................................................... 69,600 70,000 126,600 152,600
Silver (000s ounces)
Asarco ............................................................................... 5,693 9,699 12,178 17,885
SPCC ................................................................................. 816 726 1,495 1,545
------- ------- ------- -------
Consolidated ......................................................................... 6,509 10,425 13,673 19,430
Asarco Beneficial Interest (2) ....................................................... 6,123 10,079 12,966 18,693
Zinc (000s pounds) (1)
Asarco ............................................................................... 38,600 57,900 72,400 115,800
Molybdenum (000s pounds) (1)
Asarco ............................................................................... 1,339 1,529 2,813 3,071
SPCC ................................................................................. 2,254 1,937 4,488 3,804
------- ------- ------- -------
Consolidated ......................................................................... 3,593 3,466 7,301 6,875
Asarco Beneficial Interest (2) ....................................................... 2,527 2,542 5,177 5,061
</TABLE>
(1) The Company's zinc and molybdenum production is sold in the form of
concentrates. Volume represents pounds of zinc and molybdenum metal
contained in concentrate.
(2) At June 30, 1996, Asarco's equity ownership was 54.0% and its
beneficial interest in SPCC was 52.3%. At June 30, 1997, Asarco's
equity ownership was 54.1% and its beneficial interest in SPCC was
52.7%.
- 13 -
<PAGE>
Average Metal Prices:
Prices for the Company's metals are established principally on the New York
Commodity Exchange ("COMEX") or the London Metal Exchange ("LME").
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Copper (per pound - COMEX) $1.14 $1.16 $1.13 $1.17
Copper (per pound - LME) 1.14 1.12 1.12 1.14
Lead (per pound - LME) .28 .37 .30 .36
Silver (per ounce - Handy & Harman) 4.76 5.30 4.89 5.42
Zinc (per pound - LME) .59 .47 .56 .47
Molybdenum (per pound - Metals Week
Dealer Oxide) 4.39 3.15 4.38 3.56
</TABLE>
Metal Hedging and Trading Activities:
Hedging: Depending on the market fundamentals of a metal and other conditions,
the Company may purchase put options or establish synthetic put options to
reduce or eliminate the risk of metal price declines on a portion of its
anticipated future production. Put options purchased by the Company establish a
minimum sales price for the production covered by such put options and permit
the Company to participate in price increases above the option price. Synthetic
put options are established by purchasing a call option and entering into a
forward sale for the same quantity of metal at approximately the same price and
for the same time period as the call option. The cost of options is amortized on
a straight-line basis during the period in which the options are exercisable.
Depending upon market conditions the Company may sell options it holds or
exercise the options at maturity. Gains or losses, net of unamortized
acquisition costs are recorded as current liabilities or current assets and are
subsequently recognized in the period in which the underlying production is
sold. The Company also uses futures contracts to hedge the effect of price
changes on a portion of the metals it sells. Gains and losses on hedge contracts
are reported as a component of the underlying transaction.
Second quarter 1997 earnings include pre-tax gains of $2.2 million ($1.4 million
after-tax) and $13.4 million ($8.7 million after-tax) for the six month period
ended June 30, 1997, from the sale or exercise of put options covering primarily
copper sold in the first half of 1997. First quarter 1997 earnings include the
Company's proportionate interest in pre-tax gains of SPCC. There were no pre-tax
gains or losses from SPCC price protection in the second quarter of 1997. A
pre-tax gain of $2.9 million ($1.8 million after-tax) from the sale of put
options in 1996 remains to be recognized in 1997 when the underlying production
is sold.
As of June 30, 1997, the Company held synthetic puts covering 72.4 million
pounds of copper at an average strike price of $1.04 per pound and 14.6 million
pounds of zinc at an average strike price of $0.52 covering a portion of
production to be sold in the second half of 1997.
- 14 -
<PAGE>
Trading: As part of its price protection program, the Company may establish
synthetic put options. Each component of a synthetic put option may be purchased
or sold at different times. In those cases where the forward sale component has
not been entered into or has been offset, call options are accounted for as
trading activities and the carrying values of such call options are recorded as
investments and are marked to market and any related adjustments are recorded in
earnings. Second quarter 1997 earnings include pre-tax gains of $0.1 million
($0.1 million after-tax) from the sale or exercise of call options in the second
quarter of 1997 and $1.1 million ($0.7 million after-tax) of unrealized mark to
market gains. Earnings for the six month period ended June 30, 1997 include
pre-tax gains of $0.5 million ($0.4 million after-tax) from the sale or exercise
of call options in 1997 and $5.5 million ($3.6 million after-tax) of unrealized
mark to market gains.
Copper Price Protection held at June 30, 1997
(in millions, except per lb. amounts)
<TABLE>
<CAPTION>
Percent of
Strike Price Unamortized Estimated
Pounds Period Per Pound Cost Production
------ ------ --------- ---- ----------
<S> <C> <C> <C> <C> <C>
ASARCO 36.2 7/97 - 9/97 $1.04 $1.1 21%
91.1 10/97 - 12/97 $0.99 $2.2 55%
44.0 1/98 - 3/98 $0.95 0.7 26%
-----
$4.0
SPCC 94.1 10/97 - 12/97 $0.95 $1.4 54%
44.0 1/98 - 3/98 $0.95 0.6 28%
-----
$2.0
</TABLE>
Gains and (Losses): The recognized pre-tax gains (losses) of the Company's metal
hedging and trading activities, were as follows:
<TABLE>
<CAPTION>
(in millions) Three Months Ended Six Months Ended
June 30, June 30,
Metal 1997 1996 1997 1996
----- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Copper $3.6 $(0.4) $18.7 $(1.8)
Zinc (0.2) - 0.7 -
Lead - 0.2 - 0.2
---- ----- ----- -----
Total Gain (Loss) $3.4 $(0.2) $19.4 $(1.6)
==== ===== ===== =====
</TABLE>
Cost of Products & Services: Cost of products and services were $558.1 million
in the second quarter of 1997, compared with $522.0 million in the second
quarter of 1996. The increase in costs reflected the higher sales volume of
copper produced from purchased concentrates at SPCC and higher operating
expenses at SPCC primarily related to an increase in power costs. In the second
quarter of 1997, SPCC sold its power plant to an independent power company in
order to avoid substantial capital expenditures to meet the power needs of
expanded operations and as a consequence power costs have increased. In
connection with the sale, a purchase agreement was also completed, under which
the power company will provide SPCC with its power needs for the next twenty
years. Under the agreement, SPCC's cost of power will increase somewhat from its
current level, while SPCC will benefit by avoiding significant capital
expenditures that would be required to meet the needs of expanded operations.
- 15 -
<PAGE>
Costs of products and services for the six month period ended June 30, 1997 was
$1,090.0 million compared with $1,087.7 million for the comparable 1996 period.
The increase is a result of higher operating costs at SPCC, higher sales volumes
of copper produced from purchased concentrates at SPCC offset by lower purchases
of refined copper to meet customer commitments.
Nonoperating Items: Interest expense was $19.4 million in the second quarter of
1997 and $35.9 million for the six month period ended June 30, 1997, compared
with $20.4 million and $42.5 million for the respective periods in 1996. Average
borrowings over the comparable six month periods are lower in 1997 due to the
use of proceeds from the sale of the Company's interest in MIM in the second
quarter of 1996 and the sale of a portion of Grupo Mexico in the second quarter
of 1997. The increase in other income for the second quarter of 1997 compared to
the same period in 1996 reflected a dividend received from Grupo Mexico along
with higher equity earnings.
Cash Flows:
Second quarter - Net cash provided from operating activities was $99.6 million
in the second quarter of 1997, compared with $70.6 million in the second quarter
of 1996. The increase is mainly due to higher operating income and a dividend
received from Grupo Mexico.
Net cash used for investing activities was $107.8 million in the second quarter
of 1997, compared with cash provided of $253.3 million in the second quarter of
1996. Investing activities for the second quarter of 1997 included cash used by
SPCC to purchase held-to-maturity securities of $208.8 million consisting of
bank time deposits with maturities ranging from three months to one year. In
addition, $61.0 million were used for capital expenditures, principally for
copper operations of which $32.3 million was spent at SPCC. Offsetting the
aforementioned uses of cash for investing activities was $126.2 million of
proceeds provided from the sale of a portion of the Company's interest in Grupo
Mexico. In the second quarter of 1996, the sale of the Company's remaining 15%
interest in MIM provided $326.2 million partially offset by capital expenditures
of $70.4 million.
Cash provided from financing activities in the second quarter of 1997 was $89.4
million as compared with cash used for financing activities of $333.2 million in
1996. Cash provided from financing activities in the second quarter of 1997,
reflect the sale by SPCC of $150.0 million of Secured Export Notes along with
the sale of $50.0 million of 8.25% bonds due June 2004. Also reflected in
financing activities was the partial use of proceeds from the sale of a portion
of the Company's interest in Grupo Mexico to repay debt. In the second quarter
of 1996, proceeds from the sale of MIM stock was used to repay a portion of the
Company's revolving credit debt.
Six months - Net cash provided from operating activities was $113.5 million for
the six month period ended June 30, 1997, compared with $86.9 million in the
corresponding prior period was primarily due to higher operating income and
lower interest expense partially offset by net cash used for operating assets
and liabilities.
- 16 -
<PAGE>
Cash used for investing activities was $170.3 million for the six month period
ended June 30, 1997, compared with cash provided of $260.8 million in the
corresponding prior period. Investing activities for the six month period ending
June 30, 1997 included the purchase of $208.8 million held-to-maturity
securities by SPCC, and capital expenditures of $123.7 million, principally at
copper operations. Offsetting the cash used for investing activities were gross
proceeds of $126.2 received from the sale of a portion of the Company's interest
in Grupo Mexico.
Investing activities for the six month period ending June 30, 1996 included cash
proceeds from the sale of MIM common shares and a 25% interest in the Company's
Silver Bell project.
Cash provided from financing activities for the six months ended June 30, 1997
reflects the increased debt at SPCC. The increase in debt at SPCC is a result of
the sale of $150.0 million of Secured Export Notes and $50.0 million of bonds to
partially finance the SPCC expansion project at the Cuajone mine. Offsetting the
increase in debt at SPCC is the repayment of Company borrowings using part of
the proceeds received from the sale of a portion of the Company's interest in
Grupo Mexico. Cash used for financing activities for the six months ended June
30, 1996 reflects the use of proceeds from the sale of MIM to repay a portion of
the Company's revolving credit debt.
Liquidity and Capital Resources: At June 30, 1997, the Company's debt as a
percentage of total capitalization (total debt, minority interests and
stockholders' equity) was 30.1%, compared with 26.7% at December 31, 1996.
Consolidated debt at the end of the second quarter 1997 was $996.1 million
compared with $814.3 million at the end of 1996. Additional indebtedness
permitted under the terms of the most restrictive of the Company's credit
agreements totaled $866.2 million at June 30, 1997.
The Company expects that it will meet its cash requirements for 1997 and beyond
from internally generated funds, cash on hand and from borrowings under its
revolving credit agreements or from additional debt or equity financing.
The Company paid dividends to common stockholders of $8.6 million or 20 cents
per share, in the second quarter of 1997 and $8.5 million or 20 cents per share
in the second quarter of 1996. In addition, SPCC paid dividends of $13.9 million
to minority interests in the second quarter of 1997. At the end of the second
quarter of 1997, the Company had 42,898,000 common shares issued and
outstanding, compared with 42,717,000 at the end of the second quarter of 1996.
Dividends by SPCC are limited by covenants under SPCC's financing agreements.
The most restrictive of these covenants limits the payment of dividends by SPCC
to 50% of its consolidated net income.
Impact of New Accounting Standards: In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (the "Statement"). The Statement specifies the computation,
presentation and disclosure requirements for earnings per share ("EPS"). It will
require the Company to present both basic and diluted EPS amounts from income
for continuing operations and net income on the face of the income statement.
The Company does not expect the impact of this statement to have a material
effect on its calculation of EPS. The statement will be effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods.
-17 -
<PAGE>
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" and
Statement of Financial Accounting Standards No. 131 "Disclosures About Segments
Of An Enterprise And Related Information." The Company is currently assessing
the impact of these statements, both of which are effective for fiscal years
beginning after December 15, 1997.
Cautionary Statement: Forward-looking statements in this report and in other
Company statements include statements regarding expected commencement dates of
mining or metal production operations, projected quantities of future metal
production, anticipated production rates, operating efficiencies, costs and
expenditures as well as projected demand or supply for the Company's products.
Actual results could differ materially depending upon factors including the
availability of materials, equipment, required permits or approvals and
financing, the occurrence of unusual weather or operating conditions, lower than
expected ore grades, the failure of equipment or processes to operate in
accordance with specifications, labor relations, environmental risks as well as
political and economic risk associated with foreign operations. Results of
operations are directly affected by metals prices on commodity exchanges which
can be volatile.
- 18 -
<PAGE>
COOPERS & LYBRAND L.L.P.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of ASARCO Incorporated:
We have reviewed the condensed consolidated balance sheet of ASARCO Incorporated
and Subsidiaries as of June 30, 1997 and the related condensed consolidated
statements of earnings and cash flows for the three month and six month periods
ended June 30, 1997 and 1996.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of income, retained earnings, and cash flows for
the year then ended (not presented herein); and in our report dated January 28,
1997 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1996, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
Coopers & Lybrand L.L.P.
New York, New York
July 21, 1997
- 19 -
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
1. Asarco and two of its wholly-owned subsidiaries, Lac d'Amiante du Quebec,
Ltee ("LAQ") and Capco Pipe Company, Inc. ("Capco"), have been named as
defendants, among numerous other defendants, in additional asbestos personal
injury lawsuits of the same general nature as the lawsuits reported on Form 10-Q
for the first quarter of 1997 and Form 10-K for 1996 and prior years. As of June
30, 1997, there were pending against Asarco and its subsidiaries 569 lawsuits
brought by 5,537 primary and 2,183 secondary plaintiffs in 30 states seeking
substantial damages for personal injury or death allegedly caused by exposure to
asbestos. Three of these lawsuits are purported statewide class actions brought
on behalf of classes of persons who are not yet known to have asbestos related
injury, one of which has been dismissed subject to appeal. As of June 30, 1997,
LAQ, Asarco and Capco have settled or been dismissed from a total of 7,081
asbestos personal injury lawsuits brought by approximately 85,945 primary and
53,002 secondary plaintiffs.
2. In May 1997, the Company and five other defendants, mostly metals companies,
were sued in state court in El Paso County, Texas by approximately 394
plaintiffs, including approximately 200 minors, seeking compensatory and
punitive damages for alleged personal injury, death and property damage
resulting from toxic chemical discharges into the air, water and soil from the
defendants' facilities in El Paso.
3. With respect to the lawsuit against a subsidiary of Southern Peru Copper
Corporation ("SPCC"), the Company and others, brought in September 1995 by 698
Peruvian plaintiffs for personal injury and property damage allegedly caused by
the operations of the subsidiary of SPCC in Peru, reported on Form 10-K for 1996
and Form 10-Q for the first quarter of 1997, on May 19, 1997 the United States
Court of Appeals for the Fifth Circuit affirmed the United States District Court
orders denying plaintiffs' motion to remand the case to state court and
dismissing plaintiffs' complaint.
- 20 -
<PAGE>
Item 6(a) - Exhibits on Form 10Q
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
<S> <C>
11 Statement re Computation of Earnings per Share
12 Statement re Computation of Consolidated Ratio of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Share Dividend Requirements
</TABLE>
- 21 -
<PAGE>
Exhibit 11 Statement re Computation of Earnings per Share
This calculation is submitted in accordance with Regulation S-K item 601(b)(11).
Fully Diluted Earnings per Common Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings applicable to common stock $51,874 $72,403 $92,454 $108,088
======= ======= ======= ========
Weighted average number of common shares outstanding 42,931 42,693 42,903 42,655
Shares issuable from assumed exercise of Stock Options 123 140 123 124
------- ------- ------- -------
Weighted average number of common shares outstanding, 43,054 42,833 43,026 42,779
======= ======= ======= =======
as adjusted
Fully diluted earnings per share:
Net earnings applicable to common stock $ 1.20 $ 1.69 $ 2.15 $ 2.53
======= ======= ======= =======
Primary earnings per share:
Net earnings applicable to common stock $ 1.20 $ 1.69 $ 2.15 $ 2.53
======= ======= ======= =======
</TABLE>
<PAGE>
Exhibit 12 Statement re Computation of Consolidated Ratio of Earnings to
Fixed Charges and Combined Fixed Charges and Preferred Share
Dividend Requirements
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Six months
Ended
June 30,
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET EARNINGS (LOSS) $ 92,454 $138,336 $169,153 $ 64,034 $ 15,619 $(83,091)
Adjustments
Taxes on Income 55,436 99,924 122,465 9,375 (36,503) (37,371)
Equity Earnings, Net of Taxes (3,898) (3,837) (1,837) (47,653) (27,384) (2,575)
Cumulative Effect of Change in
Accounting Principle - - - - (86,295) 53,964
Dividends received from non-
consolidated associated
companies 1,639 4,047 1,828 14,301 1,676 803
Total Fixed Charges 40,505 83,553 99,516 66,377 64,359 62,200
Interest Capitalized (2,139) (2,839) (3,256) (869) (4,010) (7,433)
Capitalized Interest Amortized 1,252 2,274 2,949 1,727 1,629 1,825
Minority interest 56,473 88,331 129,543 809 693 615
-------- -------- -------- -------- -------- --------
EARNINGS (LOSS) $241,722 $409,789 $520,361 $108,101 $(70,216) $(11,063)
======== ======== ======== ======== ======== ========
FIXED CHARGES
Interest Expense $ 35,932 $ 76,442 $ 91,954 $ 62,529 $ 57,321 $ 51,230
Interest Capitalized 2,139 2,839 3,256 869 4,010 7,433
Imputed Interest Expense 2,434 4,272 4,306 2,979 3,028 3,537
-------- -------- -------- -------- -------- --------
TOTAL FIXED CHARGES $ 40,505 $ 83,553 $ 99,516 $ 66,377 $ 64,359 $ 62,200
======== ======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 6.0 4.9 5.2 1.6 (1.1) (0.2)
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASARCO Incorporated
(Registrant)
Date: August 8, 1997 /s/ Kevin R. Morano
-------------------
Kevin R. Morano
Vice President, Finance and
Chief Financial Officer
Date: August 8, 1997 /s/ William Dowd
William Dowd
Controller
- 22 -
<PAGE>
Exhibit I
COOPERS & LYBRAND L.L.P.
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated July 21, 1997 on our review of the interim
financial information of ASARCO Incorporated and Subsidiaries as of June 30,
1997 and for the three month and six month periods ended June 30, 1997 and 1996
and included in this Form 10-Q for the quarter ended June 30, 1997 is
incorporated by reference in the Company's Registration Statements on Form S-8
(File Nos. 2-67732, 2-83782, 33-34606, 333-16875 and 333-18083) and Form S-3
(File Nos. 33-45631, 33-55993 and 333-02359). Pursuant to Rule 436(c) under the
Securities Act of 1933, this report should not be considered a part of the
Registration Statements prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
Coopers & Lybrand L.L.P.
New York, New York
August 8, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 272116
<SECURITIES> 208848
<RECEIVABLES> 579851
<ALLOWANCES> 9139
<INVENTORY> 358008
<CURRENT-ASSETS> 1532685
<PP&E> 4492441
<DEPRECIATION> 2201675
<TOTAL-ASSETS> 4368445
<CURRENT-LIABILITIES> 603187
<BONDS> 0
<COMMON> 619877
0
0
<OTHER-SE> 1172372
<TOTAL-LIABILITY-AND-EQUITY> 4368445
<SALES> 740968
<TOTAL-REVENUES> 740968
<CGS> 558116
<TOTAL-COSTS> 558116
<OTHER-EXPENSES> 86308
<LOSS-PROVISION> 416
<INTEREST-EXPENSE> 19387
<INCOME-PRETAX> 110747
<INCOME-TAX> 29602
<INCOME-CONTINUING> 51874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51874
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
